COLP Insider – 3rd July 2020

You have probably heard a bit about TPMAs over the past six months or so. No?Actually, that isn’t much of a surprise. We have found that very few firms have actually taken on board this new alternative to operating a client account.

But we think every firm should absolutely sit up and take notice.

Think about why solicitors get into serious trouble. Dishonesty, client money and AML – they must be the top three offences that lead to strike off.

And now we have the option under the Accounts Rules to effectively remove one of those regulatory risks (client money), and seriously reduce another (AML). We can’t do anything about dishonesty, I’m afraid.

However, the existence of TPMAs has seemingly gone under the radar for most firms. And for those who do know they are a thing, how they actually work is a bit of an unknown.

So we thought we should speak to Shieldpay, one of the TPMA pioneers. A link to the ‘Everything you need to know…’ blog is below.

And before you think this is just a promotional item for Shieldpay, it is not. We have clients using TPMAs with great success. Yes, in high volume conveyancing and commercial work. And yes, they work well in practice.

So whatever your practice area, if you currently operate a client account you should at least look at whether a TPMA could work for you. Not only will it de-risk your business, but it will also do away with annual audits and will reduce your regulatory fees.

What’s not to like?

It has finally dawned on our regulator that the professional indemnity insurance market for solicitors is in a real mess. I mean, truly awful.

They may have thought that insurance brokers were exaggerating the ‘hardening’ market conditions to drum up a bit of business.

But then a couple of insurers exited the market entirely.

And a pandemic hit.

Now there is evidence of premiums increasing across the board (anecdotally around 25% in some cases). And insurers have become much more picky about the risks they are prepared to underwrite – with some firms unable to obtain cover at all.

Our recent PII update from Gary Horswell put all this into context.

The SRA has published a brief report into the market (see link below). It makes for sobering reading:

If you were expecting a happy ending or word of optimism, sorry – there is nothing in the report.

Stiff drink recommended before clicking the link.

Download the report

The SIF, the fund that underwrites the risk of claims made after a closed firm’s run-off cover has ended, was due to close in September.This should have been more of a scandal than it was. It leaves an entire generation of retired solicitors at personal risk.

After vigorous lobbying from The Law Society, the SRA has now confirmed that the fund will remain open until the end of September 2021. They may have realised that the midst of a global pandemic is probably not the time to remove a fundamental safety net.

The Law Society President was quoted by the Gazette as saying:

“There was a real danger that the closure of SIF at the end of September could leave former principals personally exposed to claims relating to work that their firm had done, perhaps decades in the past. Solicitors will be relieved, because with the breathing space this pause provides, the Law Society and the SRA can work together with insurers to try to find a practical solution that will protect former principals and their clients once SIF finally does close to new claims.”

Hopefully, additional insurance products will become available over the next year to protect those most at risk.

Fingers crossed, eh?